Fidelity multi-asset goes overweight emerging stocks, cuts cash

LONDON (Reuters) - Fidelity International’s multi-asset fund has moved to overweight on emerging-market equities and cut cash holdings to underweight, the asset manager said on Friday.

Emerging-market equity valuations are attractive while the headwinds of dollar strength and high oil prices are fading, said James Bateman, chief investment officer of multi asset at Fidelity International.

Fidelity’s decision to add more risk to portfolios shows the willingness of some big investors to buy back into stocks after a torrid year that culminated in the worst December for U.S. stocks since the Great Depression. Valuations dropped, with emerging stocks the worst hit.

“In equities there is the possibility of a last leg in the bull market, but given the significant disparities in global equity regions, we are being highly selective in spending our risk budget,” Bateman told clients.

Fidelity has joined a raft of investors embracing emerging-market stocks, an asset class that has rallied 5 percent since the New Year <,MSCIEF> after tumbling 16.6 percent in 2018. Emerging-market equity funds have taken in $3.4 billion in the past week, their 14th straight week of inflows.

Broader equity funds shed $4.8 billion, data show.

Fidelity’s multi-asset has also moved to underweight in cash, saying fixed income and equities were better investments “in case inflation does rear its head”.

The move came after the U.S. dollar outperformed stocks and bonds in 2018, taking many investors by surprise.

Inflation was more sluggish than expected in the euro zone in 2018 and U.S. consumer prices lost steam by the end of the year, posting their first drop in nine months in December as the cost of gasoline fell.

Fidelity has 236.5 billion pounds in assets under management, and its multi-asset team handles 32.2 billion pounds.